After the euphoria of their electoral victories, one of the
major challenges that will confront the President-elect, Major-General
Muhammadu Buhari (retd), and 20 or 21 new governors is the level of debt stock
the out-going administrations will leave behind.
According to the Debt Management Office, DMO, the Federal
Government has a stock of $6.445 billion in external debt (N1.29 trillion at
the rate of one dollar to N200)) and another N7. 9 trillion domestic debt
totalling N9.19 trillion, as of December 31, 2014. This is the equivalent of
two years budget.
The huge debt stock, if not properly managed, can hamper the
delivery of democracy dividends.
According to external debt figures released by the DMO,
Lagos State is the most indebted state in the country with a debt of
$1,169,712,848.65 (N233.94 billion). The state had also borrowed N167.5 billion
from the bond market. Thus, Lagos is owing at least N401.44 billion. This is
one of the issues that Governor-elect, Mr Akinwunmi Ambode will confront when
he takes over from Governor Babatunde Fashola, next month.
Among the 29 states where governorship elections were held
last Saturday, new persons will take over in 20 states, if Governor Rochas
Okorocha of Imo State is re-elected after the April 25 supplementary elections
otherwise the number of newcomers will be 21.
The other states where fresh men will take over are Abia,
Adamawa, Akwa Ibom, Bauchi, Benue, Cross River, Delta, Ebonyi, Enugu, Jigawa,
Kaduna, Kano, Katsina, Kebbi, Lagos, Niger, Plateau, Rivers, Sokoto and Taraba.
Most of these states are highly indebted. Following
declining oil prices in the international market and inability to boost their
internally generated revenue, many states, in addition to obtaining loans and
overdraft from banks, had approached the capital market in the last four years
to raise funds. The amount of money they borrowed through the issuance of bonds
has tripled over the period, rising to N673 billion from N298 billion in 2011.
About 12 states have issued bonds totalling N375 billion, surpassing the total
bonds issued by all states in the country since 1978. Lagos State tops the list
of borrowers from the bond market, at N167.5 billion. Rivers recently launched
a N100 billion bond. Delta State is third with N50 billion. Others include
Gombe (N30 billion), Ekiti (N25 bn), Niger N21 billion), Bauchi (N15 billion)
and Benue (N13 bn).
As of last December, Nigeria’s total public debt stock,
according to the DMO stood at about $67.73 billion and N11.24 trillion, which
is about N1.2 trillion higher than the 2013 figure of N10.04trillion.
A breakdown of the figures showed that external debt,
including those of the states, was $9.71 billion and N1.63 trillion. The
Federal Government’s domestic debt was $47.05 billion and N7.9trillion, while
those of the states stood at $10.97 billion and N1.708 trillion.
Using the DMO’s external debt figures without adding
domestic debts (see tables), Lagos tops the chart of 10 most indebted states in
the country with $1.17bn or N233.94 billion debt. It is distantly followed by
Kaduna (N46.88 bn), Cross River (N28.29 bn), Edo (N24.63 bn), Ogun (N21.83 bn),
Bauchi (17.51 bn), Katsina (N15.79 bn), Osun (N14.81 bn), Oyo (N14.47 bn) and
Enugu (N13.79)
Leading the states with little exposure to multilateral and
bilateral loans are Taraba (N4.56 bn), Borno (N4.61 bn), Delta (N4.85 bn),
Plateau (N6.19 bn), Yobe (N6.25 bn), Benue (N6.62 bn), Abia (N6.76 bn), Zamfara
(N7.11 bn) and Kogi (N7.16 bn).
However, if domestic debts are added, states like Taraba,
Borno and Abia, which have not issued bonds are the least indebted. World Bank
Consultant and Abia State Finance Commissioner, Dr Phillip Nto, said Abia State
is reluctant to take bonds like many other states because it would mortgage the
future of Abians.
He said: ‘’Ordinarily when you collect bond, you are
mortgaging your future because you pay over a long period of time but our
governor is one that feels that it is not proper to mortgage the future of the
state. Abia State is trying to come out from the mess, the monumental
difficulty which it was pushed into in early 2000, so for the state to be
mortgaged again means that the state will be declared insolvent. It is the
reason the governor (Theodore Orji) is not enthusiastic about going to the bond
market. But what some other states are achieving with their bond money,
Governor T.A. Orji is also achieving with the amount he gets from the federation
account and the IGR.’’
Broken into geo-political zones, the South-West and
North-West geo-political zones are foreign debt-most exposed zones. The
South-West owes N304.88 billion while the North-West has on its neck, a foreign
debt of N106.61 billion.
Conversely, the South-East is the least indebted zone with a
debt of N49.25 billion followed by North-East (N50.20 billion). Enugu is the
most indebted state in the South-East with N13.786 billion debt. The
legislative arm of the state government is currently at daggers drawn with the
executive over a fresh N11 billion local debt.
The South-South zone owes N85.46 billion while the
North-Central has to repay N56.77 billion.
Analysing the Federal Government debt, the DMO said that the
debt is sustainable as sustainability analysis showed that the debt/GDP ratio
is 11.6 per cent and Nigeria is at a low risk of debt distress, if the reforms
embarked upon by the present administration in key sectors were retained and fully
implemented. The bulk of the federal
government loans were concessionary with low interests and long moratorium.
Currently, the Federal Government spends N700 billion yearly
on debt servicing
Disturbed by the insatiable appetite of state governments
for loans, the Federal Government, last year, directed Deposit Money Banks not
to grant fresh loans to state governments unless they got approval and
clearance from the Federal Ministry of Finance.
The Minister of State for Finance, Bashir Yuguda, said the
decision is not aimed at stalling the development efforts of the state
governments, as alleged, but to protect the states from excessive accumulation
of debts.
“The domestic debt profile of some states is scary. The
states are so much in debt that only a small amount of their allocations get to
them at the end of the day because most times money for debt servicing is
removed from source,”
Addressing participants in Course 23 for security agents at
the National War College, Abuja, Yuguda said most of the states have been
experiencing difficulties in servicing their existing debts and it would not be
advisable to allow them take fresh loans.
Rather, he stressed the need for the states to continue to
look inwards for other sources of revenue to pursue their development
programmes.
